Credit unions are often overshadowed by traditional banks, but they offer unique advantages that can significantly benefit their members. These not-for-profit financial institutions prioritize the needs of their members, leading to various perks and benefits, including lower service fees, higher interest rates on savings, affordable loans, financial education opportunities, and more.
Key highlights:
Credit unions offer lower fees and better interest rates on loans and savings compared to most traditional banks, resulting in significant cost savings for members.
Personalized customer service at credit unions is often superior, providing a more attentive and member-focused experience than larger, for-profit banks.
Credit unions are deeply rooted in their local communities, supporting regional development projects and financial education initiatives, which fosters a sense of belonging among members.
Many credit unions offer extensive financial education resources, including workshops and personalized counseling, helping members make informed financial decisions and achieve long-term financial stability.
What are the benefits of a credit union?
In the following sections, we will go over the most prominent benefits that membership in a credit union brings.
1. Lower fees and better rates
Credit unions typically offer lower fees and more favorable interest rates on loans and savings accounts compared to even the best banks. Since they operate on a not-for-profit basis, any earnings are returned to members in the form of reduced fees, higher savings rates, and lower loan rates. This member-focused approach can result in significant cost savings over time.
For reference, here’s a table for the highest savings rates for credit unions and banks that don’t use a tiered savings system (for example, one APY rate up to a certain amount of funds, lower APY for those exceeding it):
Type APY VyStar Credit Union Credit Union 5.30% TAB Bank Bank 5.27% Mountain America Credit Union 5.25% Harborstone Credit Union Credit Union 5.25% Upgrade Bank 5.21% Wealthfront Bank 5.00%
Source: Nerdwallet, Bankrate, U.S. News
2. Personalized customer service
Credit unions are known for their quality customer service. With a focus on member satisfaction, they often provide more personalized and attentive service compared to larger, for-profit banks. Members are treated as owners and valued clients, creating a community-focused atmosphere stemming from the fact that members are owners and not simply customers.
Compare the quality of customer service to publicly traded financial companies, especially the worst banks, and the scale tips heavily in favor of credit unions. It’s worth pointing out, however, that customer service, while great, is not as easily accessible due to a lack of brick-and-mortar locations.
3. Member-owned structure
One of the defining features of credit unions is their member-owned structure. Each member has a say in the governance of the credit union, regardless of the size of their account balance. This democratic approach ensures that the credit union's policies and practices align with the best interests of its members, rather than shareholders.
This does have certain drawbacks, however, as credit unions are usually less competitive on a nation-wide scale and don’t have nearly the number of brick-and-mortar locations as banks typically do. Also, they usually don’t offer the extent of financial products that banks do. But that’s not necessarily a bad thing if we’re being honest. Below, you can find the largest credit unions in the US as of 2024:
AUM Members Locations Navy Federal Credit Union $170.9 billion 13.3 million 342 State Employees' Credit Union $54 billion 2.7 million 275 PenFed $34.8 billion 2.8 million 44 Boeing Employees Credit Union $29.8 billion 1.4 million 59 SchoolsFirst Federal Credit Union $29.2 billion 1.3 million 69
Source: Phroogal.
4. Community focus
Credit unions are deeply rooted in their local communities. Like regional banks, they often support local initiatives, provide financial education, and invest in regional development projects. This commitment to community well-being creates a positive impact and fosters a sense of belonging among members. By banking with a credit union, members contribute to the growth and prosperity of their community to some degree.
5. Access to financial education
Many credit unions offer a wealth of financial education resources to their members. These resources include workshops, seminars, and personalized financial counseling. This emphasis on financial literacy helps members make informed decisions about managing their money, planning for the future, and achieving their financial goals. Access to such educational opportunities is a valuable benefit that can lead to long-term economic stability and success.
Good financial literacy is one of the most important aspects leading to successful adulthood, avoiding predatory lending products like car title loans and exuberantly expensive credit cars like Inidigo or Milestone cards.
The bottom line
Credit unions offer a host of benefits that make them an attractive alternative to traditional banks. With lower fees, personalized service, member-focused governance, and other perks, unions can provide a more rewarding banking experience. For those seeking a financial institution that prioritizes their needs and values their membership, a credit union can be a wise choice.
